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Nov. 18 — President Barack Obama is likely to leave the White House with hundreds of tax regulatory
projects still in the works. President-elect Donald Trump has pledged a temporary
moratorium on all new regulations.

So, what happens to the
257 IRS projects that are in various stages of the regulatory drafting process? There isn’t likely
to be immediate action on many of them, but that doesn’t mean they are headed to the
recycling bin either.

In general “there is a lot of continuity between administrations,” Kurt Lawson, a
partner at Hogan Lovells LLP, told Bloomberg BNA Nov. 18. “A lot of regulations that
people are working on are not controversial and don’t really have any political elements.”

The uncertainty surrounding Trump’s picks for top Treasury Department positions who
will guide the Internal Revenue Service agenda, his strong rhetoric against business
regulations and the lack of policy specifics have left tax professionals wondering
if the historical handoff of regulatory guidance will happen this time.

IRS and Treasury officials have said they are continuing to work on drafting rules,
and aren’t waiting for Trump to officially begin his role. The IRS could slightly
whittle down the number of unfinished projects in the next two months.

Will They Stay or Go?

Lisa Zarlenga, a tax partner with Steptoe & Johnson LLP, said the future of tax regulations
is uncertain and taxpayers are watching carefully to see what the Trump administration
does.

Companies would be grateful to see some guidance—like the controversial earnings-stripping
regulations—go, Zarlenga told Bloomberg BNA.

But the hope is that a president who has pledged to pull most of the Obama-era regulations—across
all agencies—would consider taxpayer input before yanking rules, she said.

Several tax attorneys and lobbyists have said rules that would change how interests
in family businesses are valued for estate tax purposes will likely get shelved for
the next four years once Trumps takes office. Other controversial tax regulations
in the international realm, namely the rules on earnings stripping and transfers of
intangibles, are also at risk of ending up on the cutting room floor, said John Harrington,
a tax partner with Dentons US LLP.

Yanking the earnings-stripping rules under tax code Section 385 would make lots of
money available to help pay for tax overhaul on Capitol Hill, where lawmakers will
have to enact some provisions to curb earnings stripping if they adopt a territorial
tax system, said Jeff Paravano, a managing partner at
Baker & Hostetler LLP.

Not all regulations are eschewed by businesses. In some cases, such as the oil and
gas industry issue resolution project, business groups or taxpayers requested the
rules to give companies certainty about how much tax they would owe.

Zarlenga, who previously served as tax legislative counsel in Treasury’s Office of
Tax Policy, said a Trump Treasury might delay action while Congress is working on
tax overhaul.

Notices for Now

About half of the outstanding guidance projects have been issued as notices or are
projects that could be reproposed, meaning the agency will allow taxpayers to comment
on the rules before making them final. The remaining 50 percent are further along
in the process and have already been proposed, though they would need to be issued
as final rules to be effective.

“The administration might say, ‘Why spend all this time pulling regs now when it’s
only a matter of time?’ ” Zarlenga said.

Changes that come with a tax revamp could invalidate several types of rules. If Congress
repeals the Affordable Care Act, Zarlenga said, much of the extensive tax guidance
now in place could be obsolete.

Agenda Items

Though it is still to soon to know how a Trump administration might respond to lobbying,
it may take some time before the White House gets its guidance machinery up and running,
Harrington said.

“Their immediate focus is going to be on enacting tax reform and repealing the Affordable
Care Act,” Harrington said. “It’s likely they won’t have much of a regulatory agenda.”

He urged that the government tread cautiously in repeal efforts when it does get started,
especially in areas like consolidated returns. That involves high dollar amounts and
“sophisticated taxpayers who really do need guidance,”
he said.

Paul Schmidt, the tax chair at Baker & Hostetler, said a Trump Treasury will have
“all hands on deck” to help with tax overhaul, while Paravano predicted “a significant
lull in regulations.”

With assistance from Allyson Versprille and Colleen Murphy in Washington.

To contact the editor responsible for this story: Meg Shreve at
mshreve@bna.com

For More Information

The list of in-progress tax regulations from the Office of Information and Regulatory
Affairs is at
http://src.bna.com/kcr.

Highlights of IRS Rules That Could Be in Limbo Under Trump

PROJECT

NEXT STEP

WHAT RULES DO

NUMBER

Exempt Organizations: Excise Taxes Relating to Donor-Advised Funds

Proposed Rules

Curb the ability for taxpayers to get a charitable deduction without donating the
money.

REG-142338-07

Exempt Organizations: Requirement to Notify IRS of Intent to Operate as a Social Welfare Group

Final Rules

Require Section 501(c)(4) organizations, which can lobby the government, to notify
IRS within 60 days of formation.

REG-101689-16

Corporate Taxes: Spinoff Guidance for Device and Active Trade or Business

Final Rules

Outline what types and amounts of assets qualify for a tax-free spinoff.

REG-134016-15

Financial Products: Deemed Distribution of Stock

Final Rules

Outline timing and amount for situations where deemed distribution of stock occurs
because the conversion ratios change in way that increases the person's interest in
the corporation.

REG-133673-15

Financial Products: Mark-to-Market Accounting for Securities Dealers

Proposed Rules

Remove the need for a Section 481A adjustment, eliminating questions about whether
an adjustment is capital or ordinary.

REG-209724-94

International Taxes: Earnings Stripping

Final Rules

Prevent multinational companies from “stripping”
income out of the U.S. through loans to offshore subsidiaries; address intercompany
loan questions for partnerships, consolidated groups and cash-management arrangements.

REG-108934-16

International Taxes: Inversion Transactions

Final Rules

Block larger U.S. companies from merging with smaller foreign companies to take advantage
of the foreign business's lower home tax rates. U.S. Chamber of Commerce has sued
IRS over the rules.

REG-135734-14

International Taxes: Treatment of Property Transfers to Foreign Corporations

Final Rules

Prevent U.S. companies from escaping taxes on overseas transfers of intangibles.

REG-139483-13

Estate Taxes: Basis Consistency Rules

Final Rules

Require the basis of assets received from a decedent be consistent with the basis
reported on the estate tax return. An IRS official has indicated this could be published
before the inauguration.

REG-127923-15

Estate Taxes: Valuation of Family-Owned Businesses

Final Rules

Change the valuation of interests in family-owned businesses for estate, gift and
generation-skipping transfer tax purposes. House Republicans have asked Treasury to
withdraw the proposal.

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